Financial Times

Ping-pong battle over Pramuka
Ball in Central Bank's court
By Quintus Perera
Depositors of the failed Pramuka Savings and Development Bank (PSDB) - battling to prevent the bank from liquidation - in a new strategy has threatened to sue the Central Bank if it fails to cough out a six billion-rupee compensation payment.

Lawyers of the Pramuka Bank Depositors and Stakeholders Association (PBDSA) last week sent a letter of demand to the Monetary Board and Director, Bank Supervision of the Central Bank to immediately make good the loss and damage caused to the depositors totaling Rs. 6 billion or risk facing suits from depositors to recover their money. The letter was sent by S. Sunderalingam and Balendra Associates on behalf of the association.

"The interests of the depositors and creditors of the PSDB would not be adequately protected by resorting to a liquidation of the PSDB. Liquidation of the PSDB would however assist to cover the corruption, wrong-doings and failures of the Central Bank which unknown to the general public, permitted irregularities by the higher management of the PSDB giving rise to the financial predicament of the PSDB," the letter said.

The depositors accused the Monetary Board and the Bank Supervision director of winding up the bank to cover up their lapses. The letter details out the process of previous actions initiated by depositors and other matters and alleges that without taking steps to rectify fraud within PSDB, Central Bank officers allowed the wrongdoers to continue - and then decided to liquidate the Bank when things got really bad - rather than endeavour to restructure it.

The Court of Appeal has reaffirmed the depositors' contention that the harsh measure of liquidation does not adequately protect the depositors' interests, and that restructuring ought to be worked out.

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